The surge in military aircraft orders led to an unexpected increase in new orders to US durable goods factories in June, according to data from the Commerce Department on Wednesday.
Durable goods orders rose 1.9% in June after rising 0.8% month-on-month. Economists had forecast a 0.4 percent drop as surveys of Federal Reserve and regional banks’ purchasing managers showed shrinking demand for US-made goods.
The increase is due to the large jump in defense drone purchase. Orders, which rose 9.8% in May and 2.4% in April, rose 80.6% in June to $9.76 billion. Military aircraft orders rose 12 percent since the beginning of the year to $32.9 billion.
The monthly figure is the second highest ever level of defensive orders after the month following the 9/11 attacks.
Figures are not adjusted for inflation. In June, commodity producer price index increased by 2.4 percent and 17.4 percent compared to 12 months ago. Commodity prices excluding food and energy rose 0.5% in June and 9.1% year-on-year. The price index bought by US defense manufacturers increased by 0.7 percent and 15.2 percent annually.
Orders excluding defense rose 0.4 percent and 11.4 percent since the start of the year, above last year’s level. While this is more than economists expected, it likely indicates a contraction in orders after adjusting for inflation. Prices of durable goods increased by 0.5% in June and by 8.4% compared to the previous year.
Major capital goods orders, which exclude aircraft and defense spending, rose 0.5% month-on-month and 10.1% to date. They are considered a proxy for business investment and have risen slightly for four consecutive months. However, private equity equipment prices rose 0.7% in June and 9.3% year-on-year, suggesting that most or all of the increase was driven by inflation.
Orders for cars, trucks and parts rose 1.5 percent, more than double the 0.7 percent increase in new car prices tracked by the consumer price index. Auto orders rose 12.1% this year, surpassing the 11.4% increase in the consumer price index for new cars.
Excluding transportation, new orders increased by 0.3% in June compared to May and by 8.5% year-to-date. While the monthly figure indicates a contraction after adjusting for inflation, the year-to-date figure shows zero growth.
Source: Breitbart
